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A comprehensive question-and-answer guide for designing, implementing, and administering effective executive compensation programs aligned with strategic business objectives.
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What it’s about
The Executive Compensation Answer Book is an indispensable resource for anyone involved in the field of executive pay. Authored by experienced professionals in law, corporate compensation, and consulting, this book provides practical answers to the complex questions encountered in designing, implementing, and administering executive compensation plans. It covers the full spectrum of topics, from hiring and defining executive roles to structuring total remuneration packages—including base salary, annual and long-term incentives, perquisites, and supplemental benefits. With detailed chapters on special situations such as international executives, not-for-profit organizations, and mergers, this guide equips you with the knowledge to create competitive, motivating, and legally compliant pay strategies that attract top talent and drive company performance.
The through-line
- Who it’s for
- A human resources professional, compensation specialist, executive, or board member responsible for executive pay programs.
- The problem
- Designing and administering executive compensation is incredibly complex, involving numerous components, conflicting stakeholder interests, and a labyrinth of legal, tax, and accounting regulations. They feel overwhelmed by the complexity, uncertain if their pay packages are competitive, and anxious about making costly mistakes or creating plans that fail to motivate the right behaviors.
- The plan
- Build a Total Compensation Strategy to align pay with business objectives.
- Design the core components: Base Salary, Annual Incentives, and Long-Term Incentives.
- Structure essential Benefits, Perquisites, and Contracts to create a complete and competitive package.
- Adapt your approach for special situations like international executives, non-profits, and mergers.
- The payoff
- Designing competitive and effective executive compensation packages that attract and retain top talent. · Confidently aligning executive pay with company performance and strategic goals. · Navigating the complex tax, accounting, and legal landscape of executive compensation with clarity and authority.
See our guide
Related profiles we’ve built
Additional reading
- Pay without Performance: The Unfulfilled Promise of Executive Compensation · Lucian Bebchuk and Jesse Fried
This book is presented as the primary academic work arguing that high executive pay is a result of the 'managerial power' thesis, where executives exploit weak corporate governance and captured boards to extract rents, rather than being a product of arm's-length bargaining.
- The Real Story Behind Executive Pay: The Myth of Crony Capitalism · Steven N. Kaplan
This article is excerpted as the main counter-argument to Bebchuk and Fried, contending that high CEO pay is a result of market forces and a competitive 'market for talent,' similar to star systems in sports or entertainment, and is not primarily due to governance failures.
- Bonus Questions: Executive Compensation in the Era of Pay for Performance · Charles M. Yablon
Provides a historical overview of executive compensation, tracing its evolution from the era of owner-managers through the conglomerate mergers and hostile takeovers, leading to the modern focus on performance-based pay and incentive alignment.
- Are American CEOs Overpaid, and, If So, What If Anything Should Be Done About It? · Richard A. Posner
This article offers a prominent law and economics perspective that largely sides with the managerial power thesis, arguing that feeble board incentives and conflicts of interest lead to excessive pay. It also proposes several regulatory reforms, such as enhanced disclosure and back-loaded compensation.
- Power In and Around Organizations · Henry Mintzberg
The author cites this as the 'best academic handling of how environmental factors affect organization performance,' which is the first step in the book's reward design process.
- Competitive Strategy: Techniques for Analyzing Industries and Competitors · Michael E. Porter
This book provides the foundational concepts of cost-based, differentiated, and focused business strategies, which the author uses as a key framework for aligning rewards with company strategy.
- Organizational Capability: Competing From the Inside Out · David Ulrich and Dale Lake
This book is recommended for understanding the concept of organizational capabilities, a crucial link between business strategy and people strategy in the author's model.
- People, Performance, & Pay · Thomas P. Flannery, David A. Hofrichter, and Paul E. Platten
The author references this book for its framework of four general cultural types (process, functional, network, time-based), which is helpful in analyzing the 'People Strategy' component of the design process.
- The Structuring of Organizations · Henry Mintzberg
Recommended for its in-depth synthesis of research on organizational structure, a key element of the 'People Strategy' analysis.
- Executive Salaries and Bonus Plans · John Baker
Cited as the first major empirical study of executive pay, using newly available data from the 1920s and 1930s. It provides the crucial historical baseline for the book's long-term analysis of compensation trends.